Two weeks ago we released an infographic showing the life of a normal person as we imagine it in 2025. The kinds of automated services illustrated in that graphic that will appear over the next decade are all enabled by the same piece of technology: the API. What APIs, or Application Programming Interfaces, do is provide programmers with a simple way of connecting their programming into the data and services of an existing program. Any websites that embed Google or Facebook logins are accessing an API provided by Google or Facebook to authenticate users' identities. Similarly, as personal data becomes stored in the cloud, companies with permission to access such data are increasingly plugged in to their consumers' changing status and needs. Beyond just explaining how APIs are driving technological advancements across every industry, our latest Digital Lab Thought Piece provides useful tips for any business on navigating a world based on APIs - whether that means activating the APIs that are already out there, or building one of your own to create new revenue stream or make your services indispensable.
Text of APIs: The Building Blocks of the Future
BUILDING BLOCKS OF THE FUTURE
How do they do that?You may wonder how Apple’s Siri or Google Now works its magic behind the scenes. It’s more than the voice recognition—although that’s actually not too shabby. Somehow, it’s able to take action for you across your day: adding events to calendars, calling people, sending messages, knowing where traffic is and how to avoid it, and answering cryptic queries for information. And they keep getting better, and adding more services rapidly. How do they make that easy?
Or, you may notice your customers using Mint to visualize their financial data, and betterment.com to track progress towards goals—how do they work together? How does someone sign into one site using a completely other site like Facebook? How do I post an Instagram photo of the Spicy Basil Chicken dish from my Foursquare login to my Facebook timeline? How does an ad for Burberry I see on my weather app know it’s raining where I am?
Maybe your neighbor suddenly got a site built in a weekend for his non-profit, and it collects user accounts, has newsletters, and makes money from purchases of books from Amazon. How did that happen? Does he have 20 developers in his basement?
The answer—in an acronym—is APIs1. Driven by a need to access and integrate data stored in the cloud, by startups building cloud-services and by the need to build mobile apps, people are rapidly adding APIs to their applications and making them available publically. APIs allow developers to build on your data and services, and in turn allow others to build on theirs. Other platforms aggregate this functionality into even more useful services, just as you can aggregate theirs. Businesses with APIs are suddenly connected with and adding value on top of other businesses, and serving their customers in new and interesting ways. Or, like Amazon, seeing an entire new revenue stream emerge.
So, what’s an API?
1 Which is a TLA for “Application Programming Interface”
What’s an API?Simply, APIs are ways of allowing different digital services to connect and share information with each other. They are ways to connect pieces of software together—either a new user experience to backend services, or backend services together to a workflow.
It’s closely related to, and is a bit of an outgrowth of, the IT strategy of “service oriented architectures”, which tried to reduce duplication and increase ROI by combining common enterprise functionality into single services. In contrast, web APIs are generally available to the broad public or to registered developers or partners. Web APIs also have very different technical requirements—in particular, security and scale are much more a concern for public APIs.
In the lingo, you “call” an API, and the API does something and, usually, returns data. The following graphic visualizes that action behind the scenes of a movie ticket purchasing app. The person who provides the API function is said to “publish” an API, and is an API “provider”. You can find descriptions of available APIs in “registries” like ProgrammableWeb.com or Khronos.
The rapid pace of innovation in startups, funded by ready capital, is being lead by designer and developers, and the lingua franca of developers is APIs.
Movie Ticket App
Movie Info API
Credit Card Info
Movie nameTimesTheater locations
Movie nameTimesTheater locations
Payment Confirmed! Thank you!
Return payment confirmation
Transmit the requested data
Enter relevant search query
Submit user payment data
APIs are revolutionizing the web revolution.The rise of available APIs has coincided with the rise of a tremendous number of single-purpose mobile apps, or new financial tools. Right now we are seeing a great unbundling of customer service into a set of apps and websites, spread across a customer journey. Where banking customers used to interact with one—maybe two—web applications to manage their money and investments, there is now a wide variety of apps they use daily—like Mint.com, betterment.com, or Nutmeg, and trading apps. You can use APIs to participate fully in this ecosystem, share data, and integrate partners.
You can gain efficiencies, and still create great experiences, by taking advantage of other services your users already use, or to find out more about the user from partner services. You can also use APIs to write functionality once, and use it in your mobile web, your mobile app, and your website so the user gets a consistent experience.
To take credit card payments on your website, you use a API to call a processing vendor, and get back whether the transaction suceeded. To sign in with Facebook on your app, you use a set of APIs to ask Facebook if this person exists, and you get back confirmation. You can use Google Map APIs to display your store locations, and even give directions.
Better, you can start adding value to your digital experiences based on data you can learn about your user in real-time. You
can use Facebook APIs to find their friends that have liked your content. You can use an Akamai API call to see where your site visitor is, and then Weather.com API to find out if it’s hot where they are, and then adjust your website content or product recommendations accordingly.
If you have a mobile app that uses data or content from your existing CMS systems, you’re probably using APIs already to call back to your home systems for information.
More interestingly, people are storing data from connected objects—like Fitbits or Nike Fuelbands—in the cloud, where the data can be made widely available. With the right permission from your user, you can connect to that data, and change how your user experiences your brand.
Also, with the right strategy, data, and technical planning, you might be able to provide valuable data and features through APIs yourself. You can make your unique functions available to partners, startups and even other groups in your own company. In addition to making your offering more accessible across emerging devices and platforms, you might be able to consider APIs as yet another channel for commerce and brand growth.
APIs are the building blocks for a very interesting, flexible future. Let’s see how you can use—and provide—them.
Yay Developers, But So What?This is great for developers, but how does this affect your business? In a nutshell, in two big ways—making what you do easier and making your customers use you everywhere. It’s the way you can build partnerships with other apps your clients are already using. It’s how you can own transactions and features that developers will use to build the next great app.
At the end of the day, there are two ways you can embrace APIs —as a consumer, and as a provider. It’s worth cataloging what features and functions you’re providing now, and seeing if there are internal or external services you can leverage into an API instead of writing new systems yourself.
Let’s look at the reasons for leveraging external APIs more heavily for your experience architecture.
“Customers are going to have a wide choice, and we’re not sitting back and watching that landscape—hence, our API platform.”
Skip Potter, Senior DIrector of CapitalOne Labs
Consuming APIsFirst, you’re probably using a bunch of external APIs already on your website—like Facebook Connect and Graph, posting things to Instagram or Twitter, or using a prefab widget for social sharing. But there’s a world of emerging API providers that you might not be aware of. What do you gain by keeping on top of this market, and using external providers?
It’s not all roses, to be sure. Any startup you build an experience around might, themselves, pivot to something not so useful to you. They may run out of funding. They might get purchased – or get a significant investment – by a competitor, or someone completely orthogonal to your business.
Sometimes, startup APIs don’t exactly work (or scale) as advertised. Or, like in the case of Twitter, the APIs and protocols change when they want, rather than when you need.
The key is to pick and choose which APIs to keep internal, and which to push off. The good news is that the range of APIs to keep internal shrinks to the ones that make you awesome and unique, and the commodity ones can get pushed outside to someone else who specializes in deliver that service at high quality.
First, by leveraging external API providers and cloud based platforms, you gain focus. You no longer have to worry as much about developing custom features or spending time in complex system integration projects. You can spend more time and energy focused on developing rich, amazing experiences, and less building custom backends.
You probably can’t invest in building a high-volume SMS platform to provide extra security. Luckily, Twilio has already done it for you. You may have some crazy engagement idea that requires new technologies for your corporation – most likely, there’s a startup out there with an API. The more you can leverage external APIs, the broader your canvas becomes for providing amazing experiences and services to your customer.
Along with innovation comes marketing agility. You can find new capabilities and build partnerships with critical components and features – all faster than you could recreate that wheel that they’ve already created, marketed, and are in dire competition to provide the best of.
Your customers are already using a growing set of mobile apps and websites to handle bits of their lives. By leveraging external platform APIs, you can connect to customers where they are, and use the data they are already sharing with their friends to drive better experiences – and reach their network as well.
Providing APIsMore challenging, but potentially more powerful and profitable, is becoming a provider of APIs.
You’ll need to pick and choose where you think you can add value to the world of APIs and developers. If you just have a simple website with a contact us form, there’s probably not a whole lot of value in opening your infrastructure and data to the outside. But if you’re providing a value-creating service to your users—recipes, calorie tracking, financial services and transactions, loan comparisons—adding an API might prove extraordinarily valuable.
You don’t have to provide unlimited data and features for free. You can structure your API offering to be rate-limited, to charge per call, or as an intro device (use a lot, get a call from your sales team). A good strategy would consider all your options against the cost of providing the service.
Here are a few reasons how this can pay off for you.
“This is all about the customers. We allow developers to integrate Netflix service into apps with full control over the user experience. So we are able to outsource innovation ... and that’s a great thing.”
Michael Hart, Director of Engineering, Netflix
Third-party developers could help raise the value of your data by combining it with other sources of data (e.g. a mashup combining a map API and an ATM locations API). You can unlock the creativity of the crowds, who may come up with something unexpected and delightful. It’s a reasonably low-cost way to do experiments and offload risk to the development communities. If something amazing comes up. Startup Indeed initially offered online publishers the ability to pay for a real time search API of online jobs. Not many took them up on that offer. But when they injected their sponsored jobs into the API and offered to share the revenue with publishers, the demand was huge.
“We tried charging for our API without much success. Then we paid developers to use it and it took off.”
Paul Forster, CEO, Indeed
A NEW FUNNEL
Online businesses no longer measure their success on the number of users visiting a primary web domain or launching a mobile application. Internet startups now incorporate analytics quantifying the usage of their APIs by third-party applications.
By building their services with an API at the core, online ventures are able to expand their reach to larger demographics through third-party services. If your business provides an API, its usage numbers could be as important as your primary web domain traffic data.
Both JPMorgan Chase and Intel host and sponsor hackathons, where developers work over a weekend on some set of problems using APIs and other technologies. They’re a great source of social capital, as well as a proving ground for digital talent.
Here, too, there are new concerns to address. You’ll need to actively reach out, take feedback from, and work with developers. You may need to plan new IT infrastructure to handle external access to services. And, of course, you’ll have to think and plan what services to offer, and how to budget for them.
Depending on what kind of APIs you provide, and how you structure the business case around your APIs, you might even find new customers. CNET provides a metered API – if you start to exceed limits, you’ll get a call from the sales team.
However, charging for API usage (like Alexa) might limit the reach and usage. A careful strategy that balances costs, API usage models, and potential success is vital. Your business is different than a startup’s—plan accordingly.
Navigating a world of fragmented devices.The device fragmentation resulting from the impending “Internet of Things” will force most business services to be accessible and usable on a multitude of devices and systems. Taking the API path is a good first step towards solving that future problem.
With an adequate API strategy, you are ensuring your services will be available in any online connected context, present or future.
Feature Phone Web App
Private Business Partner
“Developers are now sitting between you and consumers. They are like the retail store in the value chain.”
Sam Ramji, Software Strategist at Apigee
“APIs are how we are going to build software in the future. We are just going to glue it together.”
John Musser, founder of Programmable Web
Let’s look at some notable examples of API providers; some of them are well known and provide their own APIs, while some work behind the scenes as components of well-known mobile apps or solutions.
Google Maps APISince its inception in June 2005, Google Maps API has been integrated by hundreds of thousands of online services and is now the most used API for mashups. It’s free for commercial use below 25,000 map accesses a day. Here’s how a few companies are building on the Maps API.
LEGO Australia teamed up with Google to build LEGO structures using Google Maps API.
Trulia uses Google Maps API for Business to let its visitors visualize data of the neighborhood around each of their listings (safety, commute, school quality, nightlife).
Facebook APIPreviously known as Facebook Connect and part of the Facebook API, Facebook Login has simplified the authentication process for thousands of online services.It lets people safely sign-up and log-in using their Facebook credentials on third-party platforms. Those platforms can then optimize the experience based on the user personal data and their social circles.
Twitter, Instagram, LinkedIn, Google, and Weibo among others are now providing similar authentication systems.One third party application using the Facebook API is AirBnB.
AirBnb let users quickly and easily register into their website using Facebook Login.
Once connected, AirBnb leverages the Facebook user data (via the separate Facebook Graph API) to personalize the search results based on the user’s social graph.
But not all successful web businesses have an open APIPinterest and Vine are two well-known web platforms which do not provide an API.
The positive or negative impact of this decision has yet to be quantified.
Vine is known to have an internal API on which the branded Vine mobile applications are actually built (but their API has still not been made public). In the meantime, Instagram has launched its video service with the video functionality already available through their API.
Google+ is also not providing an API per se, but some of its underlying services (such as Google Authentication) are available through more generic Google APIs.
Developers don’t pay for any of the services provided.
FREEFacebook, Twitter, Instagram, LinkedIn
PAY AS YOU GOAmazon Web Services
TIEREDMailchimp, Campaign Monitor
UNIT-BASEDSprint, Yahoo!, BOSS, Wordstream
TRANSACTION FEEPayPal, Braintree, Stripe
REVENUE SHARING/ AFFILIATION
Developers pay for what they use with a minimum fee.
Developers pay weekly, monthly or yearly with usually a limit in the number of operations they can execute based on the tier level they belong to.
Developers can use the API for free unless they are willing to go beyond a specific number of requests and transations per day/month.
Developers purchase credits on demand or over a defined period which they use to call certain API services.
Developers pay for the service through a transaction fee.
There is also the case of developers getting paid via revenue sharing or affiliation.
Governments (Open Government Data)
Governments are also opening up with open data initiatives happening all around the world. The Open Government Partnership is influencing and leading governments to promote transparency, increase civic participation, fight corruption and use technology to be more effective and accountable.
Back in June 2013, thick clouds of haze resulting from illegal wildfires on the Indonesian island of Sumatra affected Singapore. The pollution level was high, threatening people’s health. In days, multiple independent mashups built around the Pollutant Standard Index (PSI) got launched to inform citizens. The PSI data was coming directly from the open datasets provided by the Singapore government.
APIs can create value for non-digital businesses too.These companies already have an API.
New York Times
The newspaper industry has been in crisis for the last 10 years. Rare are the newspapers that have been eager to innovate. The New York Times jumped early in 2008 onto the APIs bandwagon.
The Times gives access to programmers and developers to 2.8 million news articles going back to 1981, but also to movie reviews, best sellers, events, real estate, comments and other user generated content. This is a newspaper that understands that content is just data that can be remixed and presented in many different ways.
General Motors has made the move towards APIs by providing developers with an development framework for vehicles.
You can either build in-car apps or apps that remotely interact with the vehicles (unlocking doors, activating alarms).
A new wave of API-only businesses are stealing market share from some of the Web’s biggest playersThe Internet era has brought up new services that have shaken entire industries.
With the API era will come new services that will put even established digital platforms in uncomfortable positions. These services were born as APIs and don’t have front-end tools of their own. They are building blocks to construct your platform with. They understand the new digital business models that are open and rely on innovation.
Twilio, SendGrid and Stripe are respectively API-only equivalents of Skype, GMail and PayPal. They provide telephony, email and payments platforms to third-party developers wishing to integrate that type of services into their own applications.
As API-only platforms, these businesses stand a better chance of fighting the upcoming fragmentation resulting from the multiplication of connected devices. By tapping into the huge network of developer talent that relies on open APIs, they are quickly making existing products in their respective industries look out of fashion.
Lob is providing printing through an API.
Contentful is putting the CMS in the cloud via an API for content publishers to deal with fragmentation.
Easypost is simplifying the shipping component of ecommerce platforms via an API.
Supermarket API is listing grocery products available in local stores.
Web APIs require a new infrastructure,in most businesses: API management platforms. These platforms need to support developer portals, key management and approval, metering and billing. And of course, API security and access control must be enterprise level.
Most companies don’t support these requirements in their existing architecture.
“The question is no longer whether an API should be built—it now revolves about how the API should be built (and how a company can retain power over it).”
Peter Weller, IBM API Management
WHAT DOES THIS MEAN FOR OUR CLIENTS?
These new companies tend to provide native API solutions, which would perfectly suit companies that have not done previous investments in complex architectures.
For a business whose previous investments in architecture are significant, a solution providing a bridge between legacy communication systems and an API interface would be more than adequate. (IBM, Layer 7, Vordel, Apigee are some players in this space).
Building an API is not easy, and building a business with an API at the core is difficult. But building and managing an API on top of your existing infrastructure for internal and external consumption is even tougher.
API-only businesses devote entire teams to working on each part of their service, which is obviously not an easy task for a traditional IT department to take on.
That is what API management software comes in, streamlining all of the API management, getting approval to unlock data for external consumption or providing the needed understanding of API performance requirements.
API management is a new business in which a lot of pure players have emerged.
HOW DO YOU BUILD THIS?
Twilio and Box are examples of companies that incentivized developers through contests with free trials or compensation to build applications on top of their APIs.
Hackathons are another popular method for having developers building on top of an API. They are usually organized on weekends with all participants gathering into a venue dedicated to the event. A large potential payout is usually essential to draw quality talent. Out of the 160 Hackathons organized in the entire 2011 and the first quarter of 2012, the top prize was US$100,000.
It is very important to always keep in mind that because developers build applications, they are the first and most important users of your API. And unless you are in a strict contractual agreement with them, do not expect them to use your API only when developing applications. Developers will eventually merge data and functionalities with what your competition is providing if that makes sense on a user experience point of view.
HOW DO YOU DRIVE USAGE?
What to take away
APIs WILL BECOME INCREASINGLY CRITICAL
THIS IS A DIGITAL REVOLUTION
APIs WILL CHANGE EVERYTHING
It is now a common practice to expose part of your functionality or data as an API to others on the Web or at least internally to a corporation. It is very rare for new online services to launch without providing an API or planning an API release soon.
With the rise of the “Internet of Things” and the fragmentation of the devices market, APIs will become essential in helping your business services to be fully integrated with any type of device.
APIs will probably lead to a revolution bigger than the Web.
It has already started with mobile apps reaching billions of downloads and most of them using APIs. This will continue as cars become connected and explode as most other objects in your life become connected to the Internet through APIs. The opportunity to make sense of all these services and to stitch them together for your users into valuable experiences can’t be ignored.
APIs challenge traditional business models. They require businesses to reweigh the value of adoption vs revenue, as well as direct vs indirect interactions. Established corporate concepts of IT security, metrics and data will all need to evolve.